Macroeconomics: The Week Ahead: 1 to 5 March

Brief Preview: The new month starts with a very typical weekly data schedule, with PMIs dominating the first half of the week accompanied by Eurozone CPI, German Unemployment and US Auto Sales, while the end of the week finds it focal points in US labour data and German Factory Orders; there are also Japan’s Q4 Capital Spending along with Q4 GDP from Australia, Brazil, Canada and Turkey. In central bank terms, there is the Fed’s Beige Book accompanied by another deluge of Fed, ECB and BoE speakers, with Australia’s RBA expected to keep policy unchanged, while Ukraine’s NBU is expected to initiate a policy tightening with a modest 25 bps rate hike. But it is the rest of the events schedule that may attract most attention: the UK has its Budget (most of which has already been leaked, as ever), OPEC+ holds its monthly meeting on loosening production caps, China’s annual National People’s Congress gets under way, the Biden $1.9 Trln fiscal package goes to the Senate, the annual CERAWeek (energy) and BMO Metals & Mining Conferences get under way, while Australia publishes its quarterly Agricultural Output estimates, and the UN FAO publishes its increasingly sensitive Food Price Index. Corporate Earnings are again plentiful, and while there is no coupon issuance in the USA, there will be a busy run of govt bond auctions in UK, Eurozone and Japan.

The key market topic will of course remain whether the ‘reflation trade’ will continue, after a sharp perhaps month end related reversal on Friday, and if it does: a) what sort of fall-out will there be for risk assets, above all equity, EM and commodity markets, with credit seeing almost seeing no impact thus far, and b) will central banks need to start walking the walk (e.g. the ECB increasing ‘flexible’ PEPP purchases, further unscheduled RBA bond purchases), instead of just talking the talk of ‘no taper’ and ‘lower for longer’. The key challenges to the positive spin that a number of Fed speakers have put on the rise in nominal US yields will be if the more nascent rise in real yields gets further traction, and also if Short Term Interest Rate (STIRs) futures continue to bring forward expectations of when central banks will start to tighten policy (25 bps shifts were seen in H2 2022 & H1 2023 Euro$ contracts last week).

The OPEC+ meeting will be an interest test, with Russia clearly wanting to increase production meaningfully, having a much lower oil price factored into its budget calculations, while the GCC countries would probably prefer to ensure any production increase does not prompt much of a setback in crude prices, given their need to sure up rather parlous budgetary positions, due to the pandemic.

Another relatively busy week for corporate earnings around the world, with Bloomberg suggesting that the following will likely be among the headline makers: U.K. insurer Admiral Group, AutoZone, Avast, Aviva, Berkshire Hathaway, Bollore, Broadcom, Brown-Forman, Costco, CRH, Dassault Aviation, Deutsche Lufthansa, Dollar Tree, Evonik, Femsa, FirstRand, online gambling company Flutter Entertainment, GSX Techedu, HelloFresh, Henkel, Hewlett Packard, Kroger, London Stock Exchange, Brazil’s Magazine Luiza, Man Group, Marvell Technology, Merck KGaA, NIO, Nordstrom, Okta, Reach, ProSiebenSat.1., Prudential, Ross Stores, Sberbank of Russia, Schroders, IT provider Sea, software company Snowflake, Splunk, Italy’s Stellantis, Target, Taylor Wimpey, Techtronic, Thales, Veeva Systems, Vivendi, Germany’s Vonovia, William Hill and Zoom Video.